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Everything posted by Parsad
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What was said? Rough version: Called in and told him he needed to step away, he wasn't paying attention anymore, and had lost his touch. Continued by saying that Prem didn't understand any of the companies he was investing in and wasn't doing any detailed analysis on microeconomics, his partners agreed but were Canadian so too nice to tell him, and the bankers were cowards not asking hard questions because Canada doesn't have enough good companies. Sounds like Sanjeev. Kidding!!! Ha ha!! I'm listening to the call now. Let me see who this twat was! Cheers! Don't know who it was, but you could tell that they have very little understanding about how much analysis goes on at Fairfax when selecting investments. I'm probably one of a very few handful of people who has actually seen the internal workings and spoken to all of the analysts, portfolio managers, core group in detail over the years, and does not work for the company. This guy has no idea what he is talking about! Cheers!
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Yeah, pretty clear on his position on BB and talking about it. He said they are insiders and don't discuss securities they are buying or selling. The spike happened in Q1 as well, so I suspect if they did anything it will be disclosed in the Q1 report. Cheers!
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While they have concentrated positions, that is one of the broadest 13F's I've ever seen Fairfax report. Closer to Markel's portfolio in number of holdings and structure...other than the huge concentrated holdings like ATCO, BB, etc. Cheers!
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What was said? Rough version: Called in and told him he needed to step away, he wasn't paying attention anymore, and had lost his touch. Continued by saying that Prem didn't understand any of the companies he was investing in and wasn't doing any detailed analysis on microeconomics, his partners agreed but were Canadian so too nice to tell him, and the bankers were cowards not asking hard questions because Canada doesn't have enough good companies. Sounds like Sanjeev. Kidding!!! Ha ha!! I'm listening to the call now. Let me see who this twat was! Cheers!
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Doesn’t matter when it closes. The point is (I think) they’ve locked in that price for a future buyback of 1.4m shares. Edit: what I mean is that when it closes doesn’t affect the profitability of the eventual buyback. If the TRS contract allows the parties to close out quarterly for example, FFH may be limited to a short term window where they can accrue gains on the reference asset (1.4m shares) less the cost paid (LIBOR + spread) for the period. On the other hand, if the counter party can't close out until a specific termination date set in the future, say 1 year from initiation, then FFH has more time to capture upside on the reference asset which is exciting knowing all the tailwinds occurring at the moment (Farm Edg, BB etc, CR's etc ). Paying LIBOR + spread vs. getting upside on 1.4M shares from $443cdn for a few more quarters is a pretty attractive risk/reward with all these tailwinds in mind. I'm by no means a SWAP expert - but that's how I'm understanding this at the moment. Correct me if I'm missing something. If it’s just a financial bet then you’re right. I don’t think it’s a financial bet. I think it’s a buyback. I think once they have the cash to pay 1.4m * USD344, they close out the TRS and buy 1.4m shares, using gains on the TRS to pay for any amount by which the share price exceeds USD344. Thought about that way, it doesn’t matter whether the transaction happens tomorrow or in a decade. I could easily be wrong! Actually, the way it works is that Fairfax pays a fee...usually Libor plus a negotiated rate. As Fairfax trades higher, the counterparty pays the difference between the strike price and market price. At the end of the swap time period, Fairfax gets the counterparty payments minus the Libor plus negotiated rate. It's not a buyback, but they benefit from it as if they bought those shares, paid a fee and reaped the gains. If Fairfax stock falls, then Fairfax pays the difference between the strike price and market price into the swap. Cheers!
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I'm wondering if Prem mentioning the total return swaps hinted at what they may have done with the Blackberry spike in January. I hope they locked in some of those gains! Also, as I estimated, I would imagine book value in Q1 presently is around $500 USD...which would justify a price of $600 USD at the end of Q1. Cheers!
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I'm calling a market correction some time this year! After reading this article, I'm pretty sure we are getting near a top. I would also rename this article, "The Man No One Will Remember in 5 Years!" Cheers! https://finance.yahoo.com/news/crypto-mogul-bets-meme-investing-220000958.html
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He essentially does run $1B now through Atlas Corp. Cheers!
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To call David Sokol a "steel guy" is an incredible understatement. - He was the guy in line to run Berkshire...not part of Berkshire, but all of Berkshire, including investments. - He took MAE from $10M to $20B. - He created Home Services of America, which became Berkshire Hathaway Real Estate Services...the largest real estate broker in the U.S. - He was the guy who scouted out BYD and told Buffett and Munger to buy. - He was the guy who turned around Netjets. - He found Lubrizol as an acquisition for Berkshire...amongst others. - He led Middleburg Financial until acquisition. - He invested in Seaspan and turned it into a thriving Atlas Corp. David Sokol is arguably one of the most successful business people in America over the last 30 years! Net worth might now show it, but his experience and successes do. Cheers!
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For the life of me I can't remember where I saw this little bit, whether it was SNL or Youtube or elsewhere, but a wife is disgruntled with her husband and his gambling ways...essentially he's blown everything the family owns. When the family confronts him in an intervention, he defends himself and says that everyone is blaming him for things that weren't his fault...that people called him a degenerate gambler...he then points out how offended he is by it and smugly states "I work, I work, I'm a day trader!" Cheers!
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Totally agree! If everyone was left to their own devices, we would have utter chaos! I'll be 52 in July, and even after everything I've saved and invested, I wonder if it is still enough. I also know that the majority of people my age and those heading into retirement have a fraction of what I have saved. Without CPP, universal healthcare, medicare, etc., there is no way they would be able to live a retirement life with any dignity. Cheers!
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Sanj, You did not place a currency indicator in front of the dollar sign. FFH trading at CAD$750 is not so exciting because that is only US$600. Book value for Q4 will be what, maybe US$460? BV should be nicely over US$500 by Dec 2021, unless FFH's BB gains are as ephemeral as many of us fear. If you did actually mean that it will trade at US$750 within the next 23 months, I would suggest that is perhaps a shade ambitious. I'd love for that to happen, but... SJ Sorry! When I talk about FFH, I'm always talking in CDN dollars other than their financials...I'm still pissed over the NYSE listing! :o Yeah, for sure $750 CDN before 2022. I think they've got a 60-70% chance of hitting $750 USD before the end of 2022. Why? Assume book value is at $500 USD now...in this market, 1.2 times book is already $600 USD or $750 CDN. I've been saying that insurance was heating up before Covid, and it took a stellar leap after Covid in terms of premium pricing. They are going to write at 95% or better for the next 2 years. Add a simple 4% return on the portfolio and increase in book value should be roughly $40-60 USD a year. That means book value would be closer to $600 USD near the end of 2022...1.2 times book would be $750 USD or around $930 CDN. Mark my words! Cheers!
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But people say that every time. He was bailed out by his friends. He was bailed out by being right on the housing crisis and buying collateralized bonds. He was right because he is being bailed out by a tech bubble. As I said, in June he threw $150M of personal money into his own stock and explained why...that it was cheap. I told you guys why it was cheap even before Prem said he bought stock. A couple of other long-time FFH owners also said the same. There was an enormous amount of capital sitting on the sidelines over the last 3 years. Combine that with massive amounts of stimulus flowing into hands that don't need the cash, but they invest it in the markets, you have capital that was originally flowing into growth stocks now moving into value stocks. The Reddit and millennial bulls drew cash from sideline investors as well...so that had to find a place. This is the normal transition of capital flowing from expensive stocks into cheaper stocks...with the more expensive bubble stocks eventually crashing up to 90% of their value down the road. It's not a bailout...it's patience! Cheers! I have owned this for 13 years now and added materially in 2020. You do not need to persuade me that it was cheap! I did not, however, think they might have a chance to monetise Blackberry at $20, or that Digit would be marked up quite so fast, or that Farmer's Edge might generate a $1-2bn profit within 6 months - and I certainly did not think that all three would happen at once. I have never felt that he got bailed out before, personally. But I do not believe he invested in Farmer's Edge or Blackberry because he saw an epic bubble coming in unprofitable stocks. He thought they were great businesses and, frankly, there is precious little evidence so far that he was right. Even if BB and FDGE turn out to be super-profitable over the next decade, getting the chance to monetise them now at silly prices is transformative to Prem's IRR. That is pure luck. And being able to do it when he desperately needs capital is beyond luck. So no, sorry, he's been bailed out on this one. And I am not complaining at all. It be saying the same thing that Elon Musk was bailed out by an inflated stock price or was simply lucky. While the bubble might be true, it doesn't negate the fact that markets and observers were still wrong on Tesla and Musk's vision. Did Steve Jobs get bailed out because he invented the iPhone? Without the iPhone, AAPL today would not exist in its present form. With investing and entrepreneurship, there is always a bit of luck...but the winners always position themselves to benefit from that luck. If Buffett had not bought Blue Chip Stamps, met Munger, or eliminated derivatives contracts at Gen Re, Berkshire might not be the same either. Cheers!
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But people say that every time. He was bailed out by his friends. He was bailed out by being right on the housing crisis and buying collateralized bonds. He was right because he is being bailed out by a tech bubble. As I said, in June he threw $150M of personal money into his own stock and explained why...that it was cheap. I told you guys why it was cheap even before Prem said he bought stock. A couple of other long-time FFH owners also said the same. There was an enormous amount of capital sitting on the sidelines over the last 3 years. Combine that with massive amounts of stimulus flowing into hands that don't need the cash, but they invest it in the markets, you have capital that was originally flowing into growth stocks now moving into value stocks. The Reddit and millennial bulls drew cash from sideline investors as well...so that had to find a place. This is the normal transition of capital flowing from expensive stocks into cheaper stocks...with the more expensive bubble stocks eventually crashing up to 90% of their value down the road. It's not a bailout...it's patience! Cheers!
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Article on how 28% of American's bought one the hyped Reddit stocks: https://finance.yahoo.com/news/gamestop-amc-reddit-investing-213609595.html Sad! Also margin lending versus GDP is at a historical high now. That doesn't bode well! Cheers!
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Never bizarre. How many times have we made money when Fairfax was undervalued? Or Northbridge...or Odyssey Re...this is the gift that keeps on giving. As long as you understand the business and can value it properly. Prem bought $150M of stock in the depth of the market with his personal money. Not hard to figure out the stock might be cheap and eventually would be priced properly by Mr. Market! Cheers!
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Food for thought, Ben Watsa's Marval Capital was up 25% in 2020. He owned iRobot at an average cost of $46 and sold during the whole AMC/GME Reddit bubble at $167. If Ben sold his iRobot position, hopefully Prem was able to monetize the Blackberry position in some manner when it was crazy too. This is one FFH quarterly report and conference I am looking forward to in a while...should be very interesting! Cheers!
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It's a leasing business in a highly competitive market where customers struggle to earn anything close to a double digit return over a full cycle. I think it's an okay'ish business, though that APR transaction seemed sleazy (they have long term contracts in place, so they should be insulated from quick ups and downs without ARP - that argument could be used universally to diversify, but investors rightly don't appreciate that). If Seaspan earns excess returns, liner companies will be inclined to order ships themselves and keep them on their balance sheet. No secret sauce in calling a large Korean Shipyard. So while it looks like a good trade at a fat discount to tangible book, when the market freaks out about short term rates, why should it trade much above book? Actually, it's not the same for every company. If you studied how Netjets and other fractional jet companies work, and what Sokol did to differentiate Netjets, it becomes easier to understand what he is doing with two capital intensive businesses that operate in scales of time. That's why shipping companies go under...because they all think all they have to do is buy ships and lease them out. That works perfectly fine when the economy is good and the market is doing well and shipping rates are rising. That does not work at all when the economy turns sour and rates decline, because your debt load and interest costs remain the same...and you're stuck with new ships/leases coming on line that you no longer need. Same with energy...capital intensive, but time has less influence...unless you are APR which does a significant amount of business in short-term energy solutions. What Sokol brings to the table is the understanding of how to create flexible financing solutions in capital intensive businesses and how to maximize leasing capacity. He increased Netjets booking efficiency from 85-86% to like 95-96%. It's not as easy to emulate as people think. Cheers!
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Hi All, Please keep debates to the message board and don't PM people unless it is a cordial message or you know them. I also would not assume someone's intentions simply because they are new, PM'ed you to question your data sources. It should be kept to the message board, but I can see a newbie mistake occurring as well. If it continues then that's a problem. Thanks! Sanjeev
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Chen has a fiduciary duty to do what is right for his shareholders. Doing a giant stock offering is not in those interest, agreed, but i think there is happy medium where he can re-fuel his capital allocation tank and that would serve his shareholder and himself just fine. And that would greatly benefit Blackberry, its sets of optionality, and by extension its long term holder. At current valuation of $7 billion, he can raise $1 billion or less at current price. That would ~60 or so million shares. I think BB outstanding shares is 562 million. So 622 million post offering. 10% dilution for additional optionality is worth it. Money needs to be raised when you don't need it (And i think BB needs it) and when cost of equity is lower, ... not when you really need it and desperate for it. If the latter, than Prem Watsa is going to get more good deal with more convertibles. That would make me, a FFH shareholder and no longer a BB shareholder, happy, but at the same time there is limits to that, given that Prem is also a long term owner of the common shares as well. And if he really believes in that, his intention shouldn't be extracting more cash flow in interest payment to the detriment of Blackberry. There is a point i think, the long term ownership comes into conflict with short term ownership. And I think we saw that when the convertibles were re-priced/re-structured in 2020. Long point made short, and quoting Buffet (perhaps butchering a great quote}: "[bB] should be so well capitalized that it shouldn't even rely on generosity of friends [FFH], let alone strangers [sharks] in times of need" PS: I think the current support on BB shares are encouraging in the market, assuming it is not a short covering. +1! Whether they raise capital at BB or Fairfax monetizes the asset in some way...certainly a better position for Fairfax than 3-4 months ago, let alone back in March of 2020. Cheers!
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Even if Fairfax doesn't do something directly, BB can do a raise of $1B or something and secure their balance sheet. That would also help Fairfax indirectly. Cheers!
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If the bio-terrorist attack would have the same ultra low death rate? I sure hope they'd be debated. It is a war alright. An (mis-) information war on the populace and "the good guys" are not winning. Hardly surprising but still very disappointing. We can debate the merits of being too cautious or opening up the world to normal business and letting the chips fall where they may. That's easy to say if your health isn't compromised or you're over age 75. We can also compare other parts of the world that simply let the virus spread and create herd immunity early, but you can easily show how isolated regions like New Zealand, the Caribbean, PEI, etc were able minimize infection thanks to their isolated locations. The irony is that those complaining about closed businesses now, weren't complaining about closed borders a year ago...so which is it? There is no true right or wrong answer. It's easy for us all to be Monday morning quarterbacks, and I don't blame either administration for tackling a problem that they've never faced, were unprepared for and hit the entire globe. And who exactly are the "good guys"? My family has lost three people to Covid-19 that normally would not have died if it was simply influenza. I have four friends who have lost family members. It's ultra low only for the majority of people, but extremely deadly for a minority. Cheers!
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Who else in the Fairfax sphere owns BB shares? Some management, directors...Francis has some BB in the Chou Funds...maybe Vito Maida at Patient Capital...University of Waterloo's endowment...Huron University's endowment...OMERS? The volumes seem to allow Fairfax's position to be covered...we'll have to wait till the conference call next week to see if they were able to take advantage of this juicy gift! Cheers!
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That's not difficult to understand. If you had 1M people carrying the virus 5 months ago, and you have 3M people carrying the virus now, you are going to have a proportionately higher number of deaths. It has nothing to do with masks, vaccines, business or anything else. If they didn't take steps previously, you would have 5M or more infected now and even a higher number of deaths. So let's stop hashing discussions around health officials taking "precautions" during a pandemic. It's a war...these measures would not even be debated if we had this many deaths by a bio-terrorism attack from another country or group. Everybody would be on the same side! Cheers!